2023 (10) TMI 1463 - AT - Income Tax

Validity of assessment proceedings against company insolvent - HELD THAT - A reading of the provisions u/s 13 and 14 of the Code along with the decision in Ghanashyam Mishra And Sons 2021 (4) TMI 613 - SUPREME COURT clearly shows that once the proceedings have commenced by institution of application under section 7 or 9 or 10 of the Code, the continuance of the pending proceedings is prohibited and when once they reach the logical conclusion with due approval of the resolution plan by the Adjudicating Authority under sub section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. For the time being, this appeal cannot be proceeded with during the continuance of the proceedings under the Code. However, depending upon the result of such proceedings before the adjudicating authority in respect of the corporate debtor, appropriate steps if any, may be taken by the appellant/respondent. We, therefore, granting leave to the appellant/respondent in this appeal to seek the restoration of the appeal, if necessitated by the orders in the Corporate Insolvency Resolution Proceedings, dismiss the appeal in limine. We also derive support for the above proposition from the decision of Murli Industries Limited 2021 (12) TMI 1182 - BOMBAY HIGH COURT The Hon ble Bombay High Court after referring to the judgement of the Hon ble Supreme Court in the case of Ghanashyam Mishra And Sons 2021 (4) TMI 613 - SUPREME COURT held that on the date of approval of the resolution plan by the Adjudicating Authority, all such claims which are not a part of the resolution plan, shall stand extinguished and no personnel shall be entitled to initiate or continue any proceedings in respect to a claim, which is not a part of the resolution plan. In the present case also, it is not a case of the Department that the claims which are part of subject matter of appeal are part of the resolution plan. Therefore, the ratio of the Jurisdictional High Court in the case of Murli Industries Limited (supra) is also squarely applicable to the facts of the present case. Thus, we do not find any merit in the appeal filed by the Revenue.

Summary

Issues:
Appeals filed by Revenue against orders of ld. Commissioner of Income Tax (Appeals) for assessment years 2008-09, 2009-10, and 2010-11. Interpretation of provisions of Insolvency and Bankruptcy Code, 2016 in the context of Corporate Insolvency Resolution Proceedings (CIRP). Applicability of the decision in Ghanashyam Mishra And Sons vs. Edelweiss Asset Reconstruction. Effect of resolution plan approval on claims against Corporate Debtor. Jurisdictional High Court's ruling in Murli Industries Limited case.

Analysis:

The judgment pertains to appeals by Revenue against orders of the ld. Commissioner of Income Tax (Appeals) for the assessment years 2008-09, 2009-10, and 2010-11. The Tribunal noted that the facts and issues in all three appeals were identical, leading to a common decision. The Tribunal proceeded to analyze the case for the assessment year 2008-09, where Corporate Insolvency Resolution Proceedings (CIRP) were pending against the respondent-assessee. The Tribunal highlighted the provisions of the Insolvency and Bankruptcy Code, 2016, particularly section 13, which mandates a moratorium upon admission of an application under the Code. Reference was made to the decision in Ghanashyam Mishra And Sons vs. Edelweiss Asset Reconstruction, emphasizing the binding nature of claims provided in a resolution plan upon approval by the Adjudicating Authority.

The Tribunal observed that once CIRP proceedings have commenced, the continuation of pending proceedings is prohibited until the approval of a resolution plan. The Tribunal cited the decision in the case of Murli Industries Limited vs. ACIT to support the extinguishment of claims not part of the resolution plan upon approval by the Adjudicating Authority. The Tribunal highlighted that the aim of the Insolvency and Bankruptcy Code is to revive the Corporate Debtor by settling claims against it, ensuring certainty for the Resolution Applicant regarding future claims. The Tribunal noted the overriding effect of the IBC provisions and the retrospective effect of section 31 of the amended Act.

In the present case, the Tribunal found that the claims subject to appeal were not part of the resolution plan, aligning with the principles established in the Murli Industries Limited case. Consequently, the Tribunal dismissed the appeal filed by the Revenue for the assessment year 2008-09. The Tribunal extended this decision to the remaining two appeals for the assessment years 2009-10 and 2010-11, resulting in the dismissal of all three appeals by the Revenue. The judgment was pronounced on October 5th, 2023.